Another TSP Transition Update

Officials at the federal government’s 401(k)-style retirement savings program have offered a couple of updates regarding the tumultuous transition to a new recordkeeping service, as thousands of participants have struggled to access and make changes to their accounts.

The Thrift Savings Plan unveiled a number of changes to its web site as part of the transition, including a more secure login process, a mobile app, a redesigned account landing page, access to around 5,000 mutual funds and the ability to sign documents electronically. The transition also amounted to a major modernization of many of the program’s back-end processes.

But many TSP participants reported difficulties setting up new accounts, surprise changes to the maximum amount they could borrow through a TSP loan and delays in distribution of funds to their bank accounts.

TSP spokeswoman Kim Weaver provided an update on the cause of some of those reported issues in an email Tuesday. Regarding the change in maximum loan amounts, Weaver said the TSP has changed how that number is calculated; although the change was included in regulations posted to the Federal Register in advance of the recordkeeper transition, she acknowledged that the agency did not advertise the change as much as other elements of the project.

“This change was included in the Federal Register regulation changes; however, we did not include this change in our messaging prior to the transition,” she said. “This was an omission and we apologize to our participants who have been affected.”

Prior to the transition, the maximum TSP loan amount was based on: the lesser of 50% of your vested account balance minus your loan balance, and if 50% of the vested account balance was under $10,000, you could borrow the lesser of $10,000 or your full account value; or $50,000 minus your highest outstanding loan balance within the last 12 months in all of your employer’s qualified plans combined, whichever was smaller.

Now, the new maximum loan calculation is based on the smallest of three options: your own contributions and earnings on contributions in your TSP account, not including any outstanding loan balance; 50% of the portion of your total account balance of contributions and earnings on those contributions or $10,000, whichever is greater, minus any outstanding loan balance; or $50,000 minus your highest outstanding loan balance during the last 12 months.

Weaver also said that messages sent to participants indicating that their TSP payments might be delayed were misinterpreted and that all June 15 payments were disbursed on time.

“What [disbursed on time] means (and what it has always meant when we talk TSP payments) is that the TSP will disburse funds on the 15th and participants with [electronic fund transfers] can expect them in one to three days (roughly) in their bank account,” she said. “The reason the one to three days is in there is because banks have different arrangements with the Treasury Department on how they receive these funds—those arrangements are outside of our knowledge and scope.”

The next meeting of the Federal Retirement Thrift Investment Board, which administers the TSP, is scheduled for next Tuesday.